Convertible Notes

On April 20, 2018, (modified May 22, 2018)
the Company issued a $165,000 (originally $158,000) convertible note with original issue discount (OID) of $15,000 and bearing
interest at 8% per annum. The amended maturity date of the note was June 1, 2019 and was convertible on or after October 17, 2018
into the Company’s restricted common stock at $0.20 per share at the holder’s request. The OID is recorded as a discount
to the debt agreement. The Company determined the note to contain a beneficial conversion feature valued as $104,000 based on the
intrinsic per share value of the conversion feature. This beneficial conversion feature is recorded as a discount to the debt agreement.
The noteholder was also granted detachable 3-year warrants to purchase 200,000 shares of the company’s restricted common
stock at an exercise price of $0.375 per share, 200,000 shares of the company’s restricted common stock at an exercise price
of $0.50 per share, and 100,000 shares of the company’s restricted common stock at an exercise price of $0.625 per share.
The warrants were valued at $126,000 using the Black-Scholes pricing model and were recorded as a discount to the debt agreement.
The noteholder was also issued 116,000 shares of the company’s restricted common stock valued at $34,000 based upon the closing
price of the Company stock on the date of the modified agreement and recorded as a discount to the debt agreement. During the year
ended December 31, 2018 the Company accrued interest for this note in the amount of $9,000. On May 10, 2019, the Company amended
the note to extend the due date to June 1, 2019, provide for a partial conversion of $25,000 of the outstanding principal balance
into common shares of the Company at a conversion price of $0.10 per share for a total of 250,000 shares, and waive any prior alleged
or actual defaults under the note. As of June 30, 2019, the note is in default for late payment. During the six months ended June
30, 2019 the Company has accrued interest for this note in the amount of $85,000, which includes $78,000 in liquidated damages
and default interest. At June 30, 2019, the principal balance together with total accrued interest is recorded on the Company’s
consolidated balance sheet net of discounts at $234,000.

On May 22, 2018, the Company issued a $275,000
convertible note with original issue discount (OID) of $25,000 and bearing a one-time interest charge at 8%. The amended maturity
date of the note was June 1, 2019 and is convertible into the Company’s restricted common stock at $0.25 per share at the
holder’s request. The OID is recorded as a discount to the debt agreement. The Company has determined the note to contain
a beneficial conversion feature valued as $40,000 based on the intrinsic per share value of the conversion feature. This beneficial
conversion feature is recorded as a discount to the debt agreement. The noteholder was also granted detachable 5-year warrants
to purchase 500,000 shares of the company’s restricted common stock at an exercise price of $2.00 per share. The warrants
were valued at $45,000 using the Black-Scholes pricing model and were recorded as a discount to the debt agreement. The noteholder
was also issued 200,000 shares of the company’s restricted common stock valued at $58,000 based upon the closing price of
the Company stock on the date of the agreement and recorded as a discount to the debt agreement. During the year ended December
31, 2018 the Company accrued interest for this note in the amount of $20,000 and liquidated damages of $25,000. On May 10, 2019,
the Company amended the note to extend the due date to June 1, 2019, provide for a partial conversion of $25,000 of the outstanding
principal balance into common shares of the Company at a conversion price of $0.10 per share for a total of 250,000 shares, and
waive any prior alleged or actual defaults under the note. As of June 30, 2019, the note is in default for late payment. During
the six months ended June 30, 2019 the Company has accrued interest for this note in the amount of $62,000, which includes $60,000
in liquidated damages. At June 30, 2019, the principal balance together with total accrued interest is recorded on the Company’s
consolidated balance sheet net of discounts at $357,000.

The following table summarized the Company's convertible notes
payable as of June 30, 2019 and December 31, 2018:

June 30,
2019

December 31,
2018

Beginning Balance

$

432,000

$

—

Proceeds from the issuance of convertible notes, net of issuance discounts